Be Very Afraid: 5 Key Ways Homebuyers Are in the Dark

Unless you've been living in a cave for the past five years, word surely must have reached you that home values have been declining for a while. Yet 42 percent of the people polled by Zillow recently said they thought home values appreciate by 7 percent a year. Really, people?

Even in a normal market, typical appreciation is 2 to 5 percent a year (albeit we kind of went a little bonkers in the appreciation game in the mid 2000s), but nothing about the past five years has been typical.

The Zillow study also revealed a lot of other things the home-buying public doesn't understand.

More than half of homebuyers didn't know the difference between an appraisal (where the value of the property is established) and an inspection (where the guy looks everything over and tells you what's wrong with the house).

Two in five thought they had to buy private mortgage insurance (PMI) regardless of the amount of their down payment; PMI is required only when buyers are putting down less than 20 percent of the home's purchase price. Another area of confusion: More than a third thought that homeowner's insurance was optional, when in fact lenders require it.

But the biggest shocker is that nearly half of the homebuyers polled didn't understand when they actually become owners. Forty-seven percent said a prospective buyer owns a home after the purchase contract is signed. That contract is just the beginning of the escrow period, which can be both lengthy and problematic. About 30 percent of all escrows end without the property being sold.

Want to test your real estate knowledge? You can take the Zillow quiz here.

Believe it or not, the median price to buy a home in America is just north of $170,000. This may come as a surprise to coast-huggers in some of the nation's more affluent cities, but the rest of the country's been in on the secret for years. And guess what -- great homes can be found for even less than the national median. Click through to see some of the finest homes for under $150,000.